Private sector grows again – but at slower pace

Scotland’s private sector grew for a second successive month in October — but the expansion was slower as output growth weakened and new business levels stagnated, according to the latest Bank of Scotland PMI survey.

Nevertheless, private sector companies in Scotland continued to add to their payrolls despite facing the sharpest increase in input costs since September 2011, the report said.

Nick Laird, regional managing director, Bank of Scotland Commercial Banking, said: “Output for Scottish private sector companies continued to show growth in October, albeit at a reduced rate weighed down by a combination of higher input prices and stagnating new business.

“The increasing cost burden is a cause for concern, with the rise in input costs growing at the quickest rate in just over five years attributed to the depreciation of Sterling.

“Encouragingly, workforce numbers rose for a third consecutive month.

“Yet with a further solid decline in backlogs of work recorded, we could see jobs growth come under pressure towards the end of the year.”

A further rise in output charges was reported, although the rate of inflation was weaker than that for input costs.

The seasonally adjusted headline Bank of Scotland PMI – a single-figure measure of the month-on-month change in combined manufacturing and services output – fell to 50.6 in October, down from 51.2 in September.

The survey for October showed the increase in output was broad-based across manufacturers and service providers, with both reporting marginal growth in business activity levels.

New order intakes in Scotland’s private sector stagnated, following a marginal expansion the previous month.

The report said a fractional increase in new business at service providers was weighed down by a slight contraction in the manufacturing sector.

Job creation continued in Scotland’s private sector for a third successive month — but the latest increase in staffing levels was the weakest during this trend.

Scotland’s private sector companies reported the quickest deterioration in outstanding business for eight months.